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Categories: Life Insurance . General Insurance . Medical Insurance . Motor Insurance . Insurance Contract . Wealth Management . Employee Benefits . Estate Planning . Miscellaneous
Life Insurance
No. The sales illustrations are for projection purposes only. Normally, these illustrations are based on the insurance company’s prevailing bonus/dividends experience. Once the bonuses are declared, these are guaranteed by the insurance company.
There are various types of insurance products broadly classified into Life, Medical and General Insurance. Within each category there are various products to meet various financial needs. As such the Agent or FA should be sufficiently knowledgeable to dispense advice by discovering needs and selecting or designing products to suit. In addition, the Agent or FA must display genuine care and concern. While in certain instances, a comprehensive financial plan may be needed, often a knowledgeable insurance advisor may be more appropriate as insurance products tend to be more homogenous. Follow up advice and services like renewals, claims and updates are important.
All agents have annual production quotas. You should purchase a policy based on your needs and affordability. Plan your needs in totality rather than piecemeal.
Related links : When You Are Considering A Life Policy
There will always be newer policies in the market but the basic concept is still protection. When you replace old policies you lose:
a) accumulated benefits due to compounding effect
b) lower insurance premium rate of the original policy
c) potential terminal bonuses
d) incontestability period
Obtain all the information and consult other parties including Insurance Company before deciding to replace.
The illness need not be terminal before it is claimable. Most illnesses are claimable even at relatively early stages. This is especially so if early stage riders are attached. Many claimants are still alive after the treatment and collecting the claims proceeds. The purpose of critical illness policy is to provide a lump sum for treatment to help the recovery of the policyholder.
Yes. While it is unlikely, but anything can happen while the proposal is being underwritten or before the policy document is out. It will reduce complications of distribution of claim proceeds.
Under Schedule 10 para 5(1) of the Financial Services Act 2013, there is a provision for a trust for both unmarried and married policyowners. For family members outside the relationships specified in para 5(1), the nominees will receive the monies as an executor and not solely as beneficiary under para 6(1). If you are unclear, please refer to your adviser or agent.
There is no such thing as the best policy. Agents & advisers often use this sales pitch to ‘con-vince’ prospects (or unsuspecting clients) to purchase their product, or worse, surrender existing ones. Policies should be bought based on your needs and affordability. The best policy in the market is the one you have and is still inforce!
No. Under the Financial Services Act 2013, traditional life policies have guaranteed cash values. Premiums are fixed while annual bonuses once declared are guaranteed. The ILP, on the other hand, is subjected to the investment risks thus there is no such guarantee.
One of the principle elements required to effect a life insurance policy contract is insurable interest. This element is not present in this case, unlike between a parent and child. While the uncle/aunt may purchase the policy for the niece, he/she cannot be the Proposer or Policyowner.
There is an option available through Takaful Insurance which is arranged as a hibah. Check with your financial adviser or agent.
IT’S NOT TRUE!
Like standalone hospitalisation policies, the premium does change to reflect the increasing age of the life insured. Because of the Investment Value of ILPs, the increasing premium is not apparent. As such, the medical premium reduces the investable amount over time.
An MRTA is usually used to cover mortgages. But a Whole Life or IL policy can also be used. In fact, the Whole Life or IL policy is more flexible, has cash value and provides increasing cover. In addition, a Critical Illness rider may be added.
Takaful insurance is insurance concept of mutual assistance based on the Syariah principles of solidarity, cooperation and responsibility. Participants contribute on the basis of Tabarru’ (donation) to a fund that will be used to help each other in times of misfortune.
Source: Great Eastern Takaful
Takaful policies may be purchased by anyone. The policies are Syariah compliant but otherwise provide protection like normal policies.
Nominees may be elected for a Takaful policy for both muslims and non-muslims participants. Muslim participants have an option to name the nominee or nominees to act as beneficiary or Trustee. Where the nominee is intended to act as Trustee, the monies from the certificate shall be distributed according to Syariah Law (Faraid distribution). Where the nominee is intended to be a beneficiary, the nominee will receive the monies on the basis of ‘Hibah’ or gift distributed by the Trustee according to the obligation as given by the proposer.
Non-muslim participants may nominate beneficiaries and appoint a Trustee.
Yes, as long as there is sufficient cash value. Most Insurance Companies will require a minimum retention of the cash value to keep the policy inforce for a period of time. While there is an interest charged on the loan, any bonuses due will continue to be payable based on the original contract. You may repay the loan at anytime subject to a minimum amount determined by the Insurer. It is a relatively simple process to arrange.
Lapsations are often due to non payment of premium and insufficient cash values. Such policies may be revived via a health declaration within 6 months of lapsation. Otherwise, a medical check-up will be necessary. The indisputability and suicide clauses will re-apply for re-instated policies.
As long as the diagnosis meet the definition of the critical illnesses listed, example, stage 1 breast cancer, the benefits are payable. In fact, from our experience, many claimants have remained well and gainfully employed even after more than a decade. The purpose of the proceeds is to provide lump sum medical funds unlike the benefits of hospitalisation policies which are paid based on reimbursement for treatments.
Premiums for employees’ benefits are tax-deductible provided there is no investment or return element. Proceeds from Group Benefits Schemes may be taxable on the recipients. The claims from medical benefits schemes are not taxable as they are reimbursements for medical treatments.
Most insurance companies will allocate a replacement agent. Contact the insurer to get in touch with the new agent. Insurance companies also allow clients to choose an agent of their choice to service them. You may contact us at wings@mywings.com.my or 03-7729 1322 for more advice.
Such guarantee return plans pay a return rate based on the Sum Assured and NOT the amount invested. Thus, a RM100,000 plan may require an outlay of RM40,000 a year for 6 six years. The guarantee return is based on the RM100,000 sum assured rather than the total amount invested which would be RM240,000 in 6 years. It would be wise to request for the FULL quotations to ensure there are no hidden conditions like “guarantee for only 6 years”, reducing guarantee returns, or partial guarantee etc.
Most insurance companies now have Cash Guarantee Pay-out Policies guaranteeing different rates of return and different terms of payment. While the rates may indicate high values like 8% to 9% returns, which are not true returns, the protection is very insignificant. The actual returns of these types of policies are often slightly better than FD rates only. The sum assured on the other hand is barely higher than the total premiums paid. In order to provide sufficient protection for dependents, Whole Life, Term or Investment-linked products offer much higher coverage. In addition, there may be bonuses and the term of coverage is longer.
There are 2 types of life insurance policies – with and without cash values. Generally, life policies without cash values are tax deductible while those that accumulate cash values do not enjoy tax deduction. The premiums paid for cash value policies will be treated as a benefit to the employees. On the other hand, proceeds of life policies without cash values which enjoy tax deduction will be taxable on the corporations.
It is not uncommon for us to receive queries regarding the appropriateness of insurance saving products. Many expressed their reservations about such products which they had bought usually within the last 2 to 3 years. They were “enticed” into taking up such products which were promised high returns by agents, leaving protection by the wayside. In addition, these products mostly involve high outlay in the tens of thousands with low sum insured. While there is nothing wrong to take up such savings programmes, life insurance is more appropriate for protection. This is especially so if one is taking a policy for the first time or do not have sufficient protection. Programmes which focus on high returns should more appropriately form part of the investment rather than insurance portfolios. In any case, high returns hardly exist in life insurance products.
Critical illness and hospitalisation insurance polcies are some of the common insurance policies purchased by many. The reasons for this is most of us will be stricken by illnesses, some critical ones, before death. As the incidence of illnesses increases, and people are beginning to fall seriously ill at a younger age, the expenses incurred for treatment is rising rapidly. This is also one of the causes of bankruptcy.
To overcome the need for insurance policies, one must stay healthy for as long as possible especially during the productive years. Therefore, it is important to watch our diets, get regular exercises, enough sleep and rest, reduce our stress and go for regular medical check-ups. By pre-empting the onset of illness we can avoid incurring massive medical bills. Nipping it in the bud can save us a lot of sufferring.
Despite all the above precautions, many of us will not be able to escape illnesses completely. On top of that, some may even meet with accidents that require expensive medical treatment with long term care. The growing number of hospitals and medical centres are proof. Avoidance of illness is not always successful no matter how hard we try.
What then is the best way to provide a fund for treatment? How soon and how much can most of us set aside for this fund? How do we keep up with inflation rate of medical care?
General Insurance
The sum insured is to be determined based on market or reinstatement value. A professional valuer may be consulted on the value of a house. The value must also include an amount for inflation during the period of insurance since there is always the possibility that the loss may occur on the last day of the insurance cover.
Source: MPIB
Yes in the event of an injury, you can claim from both policies, subject to the benefits in each policy. Claims for medical expenses require original medical receipts. In the event of death or permanent disablement, the total sum insured will be paid from both policies.
Learn more at: “Personal Accident Insurance”
A Cover Note is a document issued by the insurer that serves as a temporary evidence of the policy contract between the Insured and Insurer. It is usually valid only for a certain period. The Cover Note should be replaced by a Policy of Insurance in due course.
Source: MPIB
While a fire policy insures against the risk of fire, a houseowner policy provides cover for fire as well as impact damage by vehicles, damage due to burglary, flooding, overflowing of water due to bursting of pipes and water tanks, etc. In short, a houseowner policy is comprehensive!
Normal PA policies would cover the injuries. A special snatch theft provision will provide cover for loss of jewelleries, as well as personal effects of up to RM2,000. Call us at 03-7729 1322 or email us at tep@mywings.com.my for more information.
Theft or burglary policies may vary between different companies. Some may include armed robberies, full theft (theft without forcible entry), and damage to premise. Before purchasing a burglary policy, it is important to ensure that the scope of cover of the policy meets your needs.
Public liability insurance is the proper policy to have. It covers both third party bodily injuries as well as property damage. Thus, if one’s business signage collapses onto a car or person, the public liability policy will provide cover against claims by the third party.
Yes. The fire policy also provides cover for damage due to lightning strike. But unlike the householder policy, the fire policy does not cover loss due to burglary.
Certain PA policies do cover traditional treatment for sprains, fractures, torn ligaments etc arising from injuries sustained during games or normal activities. Such treatment may include massages, traditional herbs, herbal wraps and the like. Official receipts are required for these treatments in order to effect the claims.
Basically, there is no difference. But it is advisable to go through the benefits covered under each plan. Usually, the Travel PA bought individually from insurance companies is more comprehensive. Apart from flight curtailment and medical benefits, policies can also cover liabilities, repatriation as well as kidnapping.
You can purchase an Annual Travel PA which provides up to 95 days of cover per trip for a year. Regular travellers will find this not only convenient but also economical. Wings Alliance can help you discover a programme that will fit your need and budget.
Medical Insurance
Yes. You may make a claim from more than 1 medical insurance plan up to the amount of the total medical expenses incurred. You may claim the total expenses from a single plan or proportionately from all the plans. You will need original receipts for the claims.
Related links : Medical Insurance , Can You Afford to Fall Ill?
You probably would not need to if you intend to work for the same company for the rest of your life. On the other hand, you may not want to be caught without a medical policy should you decide to leave the company for greener pastures or when you retire.
Of course you may want to top-up your personal medical programme in addition to the company’s benefits to ensure you have a comprehensive cover.
Many people have wrong perceptions of H&S and CI covers. They are different but work hand in hand to provide a comprehensive cover. While H&S policy indemnifies hospitalisation claims, CI is usually paid in a lump sum in the event of a critical illness. For example, dengue fever will qualify for a H&S cover but not CI, while a stroke will attract CI but not necessarily H&S as the patient may not be hospitalised.
More articles for your reading pleasure: “Can You Afford to Fall Ill?” , “Health is Wealth” , “The Importance of Critical Illness Policies”
Yes, as underwriting or selection of risk requires a client’s medical history. From this medical information and including other relevant information, the underwriter will determine whether it, is a standard risk, requires health extras, or, a declined risk. This will also reduce unnecessary queries or render the policy void in the event of claims.
Where the sum assured is small or the applicant is young with a clean bill of health, the medical history is usually not necessary.
No. The premium for hospitalisation benefits will change over the life of the ILP usually on a 5-yearly band as per standalone hospitalisation policies. In fact, the insurance charge of ILP policies changes yearly. Premiums of traditional life policies will remain unchanged over time.
Please also read: “Investment-linked Policies”
Upon admission, present your insurance medical card to the hospital for verification with the insurance company. This is to allow the insurer to issue the Letter of Guarantee for cashless admission. As this may take some time, to expedite the admission, you may use your credit card while awaiting clearance for the LG from the Insurer. If the medical expenses are paid via credit cards, they will be reimbursed after the policyholder has been discharged and a claim is subsequently filed.
Please read: “Medical Insurance” , “Health is Wealth” , “Just A Stroke of Luck?”
No. The premiums for hospitalisation & surgical schemes increases with age even after inforced. Usually the increase is a 5-year band. This is so even if the benefit is attached to an Investment-linked plan.
There are many medical (H&S) policies in the market with corresponding varieties of benefits. As such, firstly, one needs to know what benefits is required. Next, consider affordability. The reputation and claim services of the Insurer should also be considered. No less important is the reliability of the Agent or Adviser.
Pre-existing illness are illnesses existing prior to taking up a policy. Specified illnesses are chronic illnesses which require in-hospital treatment, eg. cataracts, haemorrhoids, cysts and fibroids, hypertension, hernias, stones, sinuses, etc. While the pre-existing illnesses are totally excluded, the specified illnesses are excluded for a period of time only.
In this continuing article relating to the medical claims experience, we will clear the air on the type of medical benefits mentioned in the article.
Those so called medical benefits mentioned include personal accident benefits and critical illness as well as hospitalisation benefits. Except for critical illness policies, which are available from life insurance companies only, the other types of policies are available from both life and general insurance companies.
Personal accident policies provide for treatment due to accidents only. Some accidents may not be claimable, for example, accidents due to driving while under the influence of alcohol or drugs, accidents committed while of unsound mind, provoked assault, etc. In such instances the insurance company may require more information or reports to substantiate the claims. This may give rise to a wrong impression that the insurance company is not going to pay the claims. Agents who are not in the know may exacerbate the situation.
Critical illness claims are usually quite straightforward as the specific illnesses are pre-defined in the policy documents. While they may vary from company to company, there are only 36 of them. Specialist reports are required to confirm the existence of the illness apart from a personal statement from the claimant. The insurance company will have to ensure the claims are valid to protect the pool of funds for bona fide claims.
Hospitalisation claims tend to be more varied and difficult to define. Normally, pre-existing illnesses and congenital problems are excluded, while specified illnesses are excluded for a certain period. These often give rise to claim discrepancies. Tests and screenings, unless part of the treatments, are non-claimable. As hospitalisation claims are based on indemnity, the original receipts are required for claims. These and other conditions may give rise to delays or rejection of claims.
Insurance companies are normally more diligent in validating claims that occur in the early years of policies. Policies which have been inforce for many years usually attract fewer queries as they are beyond the contestability period except for fraud. Most of those reported claims discrepancies may have occurred within the early years or contestability period of the policies. Obviously, agents who are aware and knowledgeable of insurance contracts and products will go a long way in resolving these disputes.
Next issue we will dwell on the dos and don’ts of claims.
While many may not fully appreciate it, medical policies should be purchased when the insured are healthy. Policies may also be issued with health extra or loading and /or exclusions. Policyholders very often forget about the exclusions. Medical insurance are not only underwritten based on health alone but also moral hazards, occupation and avocation (pastimes).
Taking note of the above, claimants should be aware of the following dos and don’ts:
1. Hospital and surgical claims must be accompanied by admission unless it is due to accident. Not only that, treatment in the form of medication or surgery must be administered. Admissions for observations and tests only are NOT claimable.
2. Do check your bills thoroughly as health supplements, non-medical services (TV, phone calls, special food requests, etc), and non-treatment related screenings are NOT claimable.
3. Original receipts are required for processing of claims. Duplicates and photocopies are strictly NOT acceptable.
4. Do check any exclusions, pre-existing conditions and specified illnesses that may not be claimable. Exclusions and pre-existing conditions may not be claimable for the tenure of the policies or within a certain time bar. Specified illnesses are usually not claimable within the first year or lesser.
5. Do ensure that admissions are made in licensed hospitals. Some clinics which operate bedded facilities may be accepted. It is advisable to refer to the insurance companies if such facilities are used.
6. Where possible, do pre-register admissions as this would expedite the issuance of Letters of Guarantee (LGs) thus avoiding admission delays.
7. Don’t presume that all illnesses and treatments are claimable.
8. Don’t use the medical cards like credit cards or charge cards. Medical cards are not “blanket cover” for all medical admissions. Admissibility of claims is subjected to the attending doctor’s diagnosis and report.
Sometimes, insurance companies may not be able to issue the LGs for cashless admission. This may be due to insufficient medical information, policies which are in-force within the first year or incomplete documentation. In such cases, the medical expenses may be reimbursed upon submission of claims documentation by the insured.
Be aware that claims paid actually reduce the future claims eligibility as the annual and overall lifetime benefits of the policies would be reduced. It is in the interest of the insured to ensure that there is no overcharging or bogus claims. As one claims manager had remarked, “As long as I am provided with the appropriate documents, there is no reason why I should not approve the claims.” Thus, it is the onus of the insured to make sure that the claims department receive the appropriate documents.
The next follow up of the series will be a Q&A of frequently asked questions. You may write in if you have any queries of your own.
Yes but within 90 days of travel and paid in Malaysian currency equivalent. It will not be claimable if more than 90 days continuous travel outside Malaysia. For those who will be residing for more than 90 days, they should consider purchasing a plan in the country of travel.
Upgrading to higher benefits may require further evidence of insurability. If the policy is accepted, the difference of benefits between the old and new policy will be subjected to the terms and conditions of the new policy.
Medical checkups are usually non claimable. But any tests done which leads to admission would be admissible as a pre-hospitalisation benefit claim. There is often a time limitation of between 30 to 60 days before hospitalisation.
Most medical policies provide for outpatient cancer treatment. This includes chemotherapy and radiotherapy which may not require hospitalisation. It may be accompanied by a small amount of co-insurance. Please check the policy details or refer to your advisers.
Yes, but you will need the original receipts as well as the approved claims schedule from the group insurer. This is to allow the second insurer to assess the eligibility and quantum of claims.
Motor Insurance
Excess refers to the amount that you are responsible to pay as per the policy terms & conditions in respect of each and every claim payable (including cost and expenditure incurred by the insurance company to conduct, defence and settlement of any claim for the loss or damage to your vehicle, and damage to third party property resulted from the accident arising out of the use of your vehicle for liability to third parties), in addition to any other excess that may be applicable. For example, the excess of your policy is RM300 and the total claim amount is RM1,800. Your insurer will only pay out RM1,500 for the claim while you have to pay the remaining RM300.
Source: MPIB
Related links : Motor Insurance
NCD is the abbreviation for No Claim Discount. This is a discount given to the policyholders upon renewal of their motor insurance if no claim is made from the policy during a continuous coverage period of 12 months. Persatuan Insurans Am Malaysia (PIAM) Motor Tariff sets out a fixed rate for this discounts. These are as follows :
NCD For Private Car / Commercial Vehicles | |||
| Private Car | Motorcycle | Commercial Vehicles |
Period of Insurance | Discount | ||
After 1st year | 0% | 0% | 0% |
After 2nd year | 25% | 15% | 15% |
After 3rd year | 30% | 20% | 20% |
After 4th year | 38.33% | 25% (Max) | 25% (Max) |
After 5th year | 45% |
|
|
5th year onwards | 55% |
| |
Source: MPIB
Yes. You will need to refer to the list of PIAM (General Insurance Association of Malaysia) approved panel of workshops given to you along with your motor insurance policy. This list should ideally be kept together with your policy in your car at all times.
Source: MPIB
Related reading: “Motor Insurance”
A Cover Note is a document issued by the insurer that serves as a temporary evidence of the policy contract between the Insured and Insurer. It is usually valid only for a certain period. The Cover Note should be replaced by a Policy of Insurance in due course.
Source: MPIB
The sum to be insured should be based on the market value of your car. Market Value represents the value of the insured vehicle at the time of loss or damage less due allowance for wear and tear and/or depreciation.
Source: MPIB
Betterment is a scale which is imposed to the vehicle aged 5 years and above when new franchise parts are used during an accident repair that was paid for by the insurance company. The insured is to bear the betterment charges because the vehicle’s old damaged parts were replaced with new franchise parts since the motor insurance policy only indemnifies the insured’s vehicle in the condition just before the accident. The application of betterment is at the discretion of the respective insurance companies based on the Scale of Betterment approved by Bank Negara Malaysia.
Source: MPIB
Comprehensive Cover refers to insurance coverage of loss or damage to the motor vehicle, accessories etc caused by:
• Accidental collision or overturning.
• Fire, external explosion, self ignition or lightning.
• Burglary, housebreaking or theft.
• Malicious acts.
• Falling objects
Third Party Cover refers to insurance coverage of legal liability to third parties arising out of the use of a motor vehicle resulting in death, bodily injury or damage to property only.
Source: MPIB
You must,
1) Call insurer/insurance agent immediately,
2) Make a police report within 24hrs,
3) Take photos of the accident to provide as record, and,
4) Get details of other party/parties involved including names and contact numbers, vehicle type and registration number, and the other party’s insurers.
If the vehicle is recovered before the theft claim is settled, you will have options to either:
a) To withdraw the claim (if the vehicle is recovered in good condition)
b) To withdraw the claim and undertake the repair at your own expense (if the vehicle sustained minor damage and the insured wishes to retain his/her NCD entitlement)
c) To withdraw the Theft Claim but pursue with Own Damage Claim (if vehicle recovered sustained extensive damage or has missing parts).
Source: MPIB
E-Cover Note simply means an electronic cover note issued by an Insurer and submitted to JPJ electronically and to facilitate the Insured to renew his road tax at JPJ office. The Insured will no longer be required to produce the physical cover note to JPJ. They will only need produce their vehicle registration card to JPJ after they have purchased their insurance.
Source: MPIB
Yes. This can happen when one sells an old vehicle and transfers the NCD to the new vehicle being purchased. If no transfer of NCD is made to another vehicle, the NCD entitlement level will drop one level each year. For example, if the NCD entitlement is 55% this year, it will drop to 45% next year, if it is not transferred to another vehicle. This will continue until the NCD level reaches 0%.
Source: MPIB
The standard motor insurance policy does not cover falling trees or branches, as in the case of flooding. These perils may be covered under an extension of cover to include flooding and Acts of God. There is an additional premium charged for the extension. Otherwise, one may have to institute a suit against the local councils concerned or the owners of the trees.
Insurance Contract
The Insurance Act 1996 has been repealed and replaced by The Financial Services Act 2013. Under the FSA 2013, Schedule 8 Sec 128 para 2 (1), you may object to the policy and return the policy with your written objection to the Company within 15 days from the date of its delivery to you or to a person at your residence. This is known as the ’15 days “free look” period’ which commences on sighting of the policy and signing the policy acknowledgement slip.
The Company will cancel the policy and refund the premiums that have been paid less the deduction of medical and other expenses incurred. The new Act also provides for refund of premium of Investment-linked policies.
That depends! If the intention is to provide a survival fund for your aged parents, you would not need to as this would be a Trust Policy created under Schedule 10 para 5a of the FSA 2013. You could purchase new policies to provide for your new family instead.
Conversely, you can appoint your spouse as the new nominee. This would then revert it to a Trust Policy for your new family. This only applies to your life and personal accident (PA) policies under the Financial Services Act 2013.
Co-insurance are usually found in H&S policy contracts. This is the co-payment of claims proceeds shared between the Insurer and the Claimant / Insured when the claimed benefits are higher than the benefits indicated in the contract.
Co-insurance is also a form of check and balance to prevent abuse of benefits.
Third party policies may include children’s policies as well as husband and wife policies. It is important to provide a residuary clause or a clause to specifically include policies in the Will to ensure the ownership of the policies are passed on to the intended beneficiaries.
Yes. The Financial Services Act 2013 also applies to PA policies. Thus, parents named before marriage or spouse and/or children named after marriage will fall under Schedule 10 para 5(1) distribution. It important to note that the PA policy is an annual contract thus the beneficiaries should be annually reviewed.
Under the Financial Services Act 2013, nominees other than those under Schedule 10 para 5(1), are merely holding the claim monies in trust. Thus, in order to be certain, the policy should be absolutely assigned. An informed or professional agent or adviser would know how to assist you.
Yes. Nominees may be changed. But nominees named under Schedule 10 para 5(1) of the Financial Services Act 2013, may only be changed with the Trustee’s consent. Get a professional or qualified agent or adviser to assist.
APL stands for ‘Automatic Premium Loan’. When the premium becomes due but not paid after 30 days, an APL will be initiated against the Cash Value to keep the policy inforce. An interest rate will be charged. In the event of a claim, the APL will be deducted from the claims proceed.
Wealth Management
The purpose of refinancing is to
i) reduce the mortgage interest, thus savings, and
ii) to create additional funds from latent value of the property.
Refinancing to invest in high risk or uncertain ventures should be done with utmost prudence. Consult an adviser to ensure it meets your financial objectives.
This is based on the idea that since whole life plans are more expensive than term, it is better to invest the difference. But often the difference may be too small for any meaningful investments. Investments are not guaranteed and may not fit the individual’s risk tolerance. Furthermore, cash values of whole life plans do help to prevent lapsation especially after retirement due to the guarantee features.
Also read: “The Need For Financial Planning” , “Financial Planning – Establishing Goals and Objectives” , “When You Are Considering A Life Policy”
That would depend on your expectation, objectives, duration of investment and your risk appetite. Unlike speculation, most investors, from surveys carried out, are happy with 8% returns on their investments. It is important to be disciplined in order to achieve the desired returns.
The foundation of a sound financial plan is based on the 2 “i”s – investment and insurance. While most people would want to invest for returns first, it is important to have adequate insurance in case of a rainy day. As the proverbial goose that lays the golden eggs, insure the goose first. In addition, because the proceed of a life insurance policy can be arranged as Trust Policy money, it can be treated as almost immediate cash upon the demise of the investor.
High return investments often come with high risk and vice versa. This is the basic principle of investment-risk relationship. Certain investments which may have high return with moderate risks are usually accompanied with other conditions. Take note and understand your own risk tolerance and objectives before investing.
Normally, as one approaches retirement age, it is best to reduce the risks. A simple rule of thumb formula may be used: (70 – age attained) = percentage of investments in stocks. Thus, if one is age 60, it is better to invest up to 90% in low risk investments.
Determine how much time you have to set up the fund and how much would be needed, before looking for options. This could include unit trusts, properties, endowment policies (or investment-linked policies), equities, fixed deposits, etc. Obviously there are pros and cons that should be taken into account. A combination of options may also be used, eg. life policies with unit trusts and properties.
From a financial planning point of view it is always prudent to discover your needs, investment time frame as well as risk profile before you invest. While it is likely that both these metals will see gains in the future, the growth will not be a smooth one. Investments always have inherent risks and its ups and downs. Investments that suit others may not suit you.
It depends on your current source of income and your objectives. Fixed term loan is more suitable for people with fixed income. Flexi-loan provides more flexibility thus requiring greater discipline in repayments. The accumulated capital is accessible in times of emergencies, investment opportunities or business needs. Flexi-loan comes with monthly commitment fees.
You can start by writing down your objectives and the time frame, the more compelling the reasons the better. Next, compile all your current assets and liabilities. Determine the financial shortfall within the specified time frame. Develop a strategy to overcome this shortfall using financial products and services. Then follow through with implementation and monitoring. The success of the plan will depend on the “push factor” and discipline on your part.
Savings is about giving up a little now for the future. Most people will find it difficult to sacrifice current lifestyles for the sake of building up a nest egg for retirement or other objectives. Many would also find very little left at the end of the day for savings. Inflation and commitments also eat into whatever income we produce. And then there is also the question of discipline….with all the temptations of modern living. But the bottom-line is we cannot afford NOT to save.
Most businesses would have borrowings in the form of loans or debts due to creditors. While the business is still ongoing, these debts will be settled in due time. But in the event of untimely death or critical illness, the repayment may be difficult. A debt cancellation plan will pay off these debts in a single installment with no future liabilities. These plans need not cost much and are mainly tax deductible. There are many other advantages to implement such a plan.
Employee Benefits
It would be advisable to. The common cover will include hospitalisation & surgical insurance and personal accident insurance. Both provide 24 hour worldwide cover. The premiums are deductible expenses against the company’s profits.
The minimum number of employees required is 5. This applies only to hospitalisation and personal accident benefits. Spouses and dependent children may be included. Premium savings is not significant for such small numbers.
Being in this business for over 20 years, we have much experience and information to share with our clients. We have been hands on since day 1, providing claims services, monitoring employee movements, updating information, briefing employees, etc. We provide yearly reviews of the schemes, supporting management staff and troubleshooting with the management.
We often seek to provide competitive rates and methods to save and manage costs like claims experience refunds and wellness management programmes. It is in our best interest to keep our clients happy and satisfied. Furthermore, purchasing directly from the Insurers does not ensure lower premiums. Turnover of their employees may affect the quality of services.
Yes, there are schemes available for small businesses such as yours where the businessowners can also enjoy low premiums with high coverage. The premium is tax deductable. For as low as RM550 per annum, an employee can be covered for RM100,000 medical benefits with RM350 for room and board. Spouses and children of employees are also eligible.
All Group Insurance policies can be customised. But the flexibility will depend on availability of funds and the size of the workforce. Where more funds are available there is obviously more choices. Normally, if the number of employees is small, for example, below 20, insurers will offer only standard packages. Where the number is large, for example, 500 employees, specially designed packages may be offered. Many options are available for such cases.
Group insurance schemes are designed to provide protection to employees. Group Term usually covers death and total permanent disability due to illness or accident. On the other hand, Group PA covers death and disability due to accident only. In addition, the cover for disability may be permanent or temporary and may be partial or total. Thus for example, if an employee suffers an accident at the work place, losing 3 fingers, the Group PA may pay benefit for permanent partial disablement. Whereas, the Group Term would not pay any benefit since it is not a total permanent disablement.
In fact, Group PA and Group Medical schemes are more common than Group Term schemes.
Hiring and retaining good employees is a challenging exercise for HR managers. More so due to the limited supply of good workforce, Group Benefit schemes will double as a recruitment and retention tool. Where the benefits are comprehensive which normally include personal accident and hospitalisation as well as critical illness cover, the employment package will become more attractive. Obviously, the overriding concern is the cost of implementation. That is why it is important to carefully study its impact on the profitability before implementing any Group Benefit scheme. Criteria for consideration include the amount of coverage, types of benefits and eligibility of employees.
Estate Planning
Yes. It can ensure that your assets are settled and distributed according to your wishes. A WILL expedites the distribution process in a hassle-free manner. A properly executed WILL reduces the possibility of “outsiders” challenging the validity of the WILL.
Read more articles at “To Will or Not To Will” , “Feng Shui Master Loses Battle of Wills”
Yes, as long as the Will is written according to the legally accepted structure. Make sure the 2 witnesses have no interest in the Will.
Yes. While a nomination in a policy will supersede the Will, there are times a policy may be willed away. In this case, leave the nomination to the estate.
The Will is the simplest way to distribute your estate. Beneficiaries receive the estate upon death of testator. Where there are specific conditions, eg. Young children below 18 years or multiple assets to manage, a Trust may be more appropriate. Consult your advisor.
The executor should be informed so that the Will may be filed in court for a letter or grant of probate. Normally the services of a lawyer or Trust Corporation are sought. The grant of probate may take more than 3 months. In the interim period, it is important to ensure there are sufficient funds for the dependents to continue with their lives. Mortgages and repayments should also be provided for.
Yes. The life insurance proceeds can be paid according to your wishes via a Will, unless it is the Schedule 10 para 5(1) Trust policy, a third party policy or where the policy has been absolutely assigned. The beneficiary named in such policy should be the estate so that it can be distributed via the Will.
Since 1st July 2013, the Financial Services Act (FSA) 2013 has come into effect, replacing the Life Insurance Act (1996). The FSA 2013 is introduced to consolidate not just the Life Insurance Act but other financial related Regulations as well with the intention of promoting financial stability.
One of the significant changes in the Act affecting Life Insurance Ownership is policyowners can no longer appoint themselves as Trustee of their policies ( FSA 2013 Schedule 10 para 5 (1) ). Policyowners who had appointed themselves as Trustees prior to this Act, may retain their Trusteeship. This clause only applies to Life Policies that come into force after 30 June 2013.
In the event there is no Trustee, the nominee(s) competent to contract shall be the Trustee(s). Where the nominee(s) is incompetent to contract, the parent of the incompetent nominee(s) other than the policyowner will be the Trustee. Where there is no surviving parent of the incompetent nominee, the Public Trustee will be appointed.
Policyowners may choose to appoint Corporate Trustees to achieve the same especially where a suitable Trustee is not available.
While it is easy to write a general Will, this may not be applicable for all testators. Anyone can write a Will as long as you have 2 witnesses, apart from beneficiaries and executor. To write a general Will where all assets are given to 1 or a group of beneficiaries may work if there are no other rightful beneficiaries and the distribution is straightforward.
There are times when testators may want specific beneficiaries to own particular assets. An example would be to leave a business to a family member who is capable of running the business while leaving properties to the others who cannot. Income producing assets may be given to beneficiaries who are incapable of earning an income. Personal belongings like jewellery, watches, heirlooms, and collectibles may be given to specific persons including non family members. Thus, whether one should write a general Will or not is dependent on each individual circumstances. Remember, there is no such thing as one size fits all !!
Miscellaneous
The greatest satisfaction in the career of financial advisers and agents is to benefit your clients through your advice and services. It is not just about money, awards and trips. A financial adviser or agent should have the passion to assist their clients to achieve their financial objectives; while achieving their own goals.
Throughout my 25 years in the financial services industry, I have achieved various awards and trips including MDRT, have spoken on various platforms locally and abroad, and have attained many degrees and accreditations. Yet, nothing compares to the satisfaction of rendering my services to the clients when they need it most.
For aspiring financial advisers and agents, it would be wise to decide a career path for yourself early in your career. Always put your clients first because they are the reason we are in this business.
Read this: “When You Are Considering A Life Policy” , “Buyer Beware!”
It is back to basics! Our forefathers had always depended on good, old financial sense to overcome the impact of rising costs and reducing cashflow. During such trying times, there is no better antidote than a good dose of sacrifice and discipline. All unnecessary expenditures and luxuries should be relegated to a lower priority or done away totally. This well meaning sacrifice calls for lots of discipline.
Expenditures should be pre-planned. Daily expenses should be closely monitored. Bargain hunting should be the norm as “every sen saved is a sen earned”. Force yourself to set aside some money regularly for the unexpected. Cut waste! All these measures may not make you rich, but can help alleviate financial stress.
Yes, we do provide claims services mostly on a pro-bono basis. Occasionally, we may charge a fee to cover some expenses and documentations. For more complex cases which may involve various reports and correspondences, some initial charges may be required. We would provide the figures for your consideration prior to commencing.
Since the articles appeared in the Star newspaper on 27th January (Painful claim) and 28th January 2012 (The agents of problems), there have been a number of “concerns” expressed by our clients and friends.
Some of these “concerns” are
1) They are worried that all medical policies have these claim problems as reported in the paper.
2) All the Insurers seem to practise the avoidance of claims by resorting to the fine print
3) Health insurance industry is full of unfair practices
4) It’s very difficult to claim hospitalisation benefits
5) You cannot trust the services and advice of agents
Over the next few weeks we will provide some answers to these concerns.
The figures shown in the articles extracted from FMB annual report 2010 represent policies which have encountered claims discrepancies. In contrast, the insurance statistics of BNM 2010 annual report indicated the total medical expenses and personal accident claims (general insurance) and medical expenses benefits paid (life insurance) are RM667million and RM1,454million respectively for the same period. The BNM report for the same period show that these problem cases only represent a small percentage of the total number of policies which are paid.
Medical policies include hospitalisation and surgical policies, critical illness policies as well as personal accident policies with medical claims. These policies may be from life and general insurance companies.
By and large, these insurance companies pay out claims with little or no hassle. The policy wordings are often drafted in legal terminology to clearly define the conditions that qualify the claim and to prevent fraudulent practices. It is true that some of these legal terminologies are not easy for laymen to understand. Where possible, insurance companies should provide an explanation in writing. In the absence of this, agents and advisors should explain the policies clearly to their clients to ensure they understand what they are buying.
In the next article, we shall visit some of these products and the potential claim discrepancies that may arise.
IS INSURER LIABLE FOR THIRD PARTY CLAIMS WHEN INSURED BREACHES T&CS?
Tuesday, 5th May 2015
Consider this scenario: you were riding your motorcycle and your handbag was snatched from behind by the pillion rider of another motorcycle. You lost your balance, fell and injured yourself badly. You sought compensation from the insurer of the other motorcycle for third party bodily injury (TPBI). As the motorcycle was used for illegal purposes when you sustained your injury, can the insurer repudiate your claim on the basis that the insured had breached the terms and conditions of the policy? Find out the answer by reading this recent court case.
Legally Speaking – The extent of an insurer’s liability in a third party claim
The Sun daily 5 May 2015
IN Malaysia, it is mandatory under the Road Transport Act 1987 (RTA) for you to insure your vehicle against damage and/or third party risks. A third party insurance policy insures you against risks such as death and injury to a third party as well as damage to the third party’s property. This article will discuss the extent of an insurer’s liability in a third party policy claim following the recent Court of Appeal case of Pacific & Orient Insurance Co. Bhd and Kamacheh a/p Karuppen on March 6, 2015. Specifically, this article considers whether an insurer is liable to pay the third party if, at the time of the accident, the insured vehicle was used for illegal purposes.
Brief facts of the case
On March 2009, Kamacheh was riding her motorcycle when a pillion rider on another motorcycle snatched her handbag from behind. She tried to resist and, as a result, fell off her motorcycle and sustained injuries. The other motorcycle was ridden by the son of the insured which was covered by Pacific Orient. Kamacheh filed a civil claim against the pillion rider and the son of the insured for the injuries sustained by her in the Sessions Court. Pacific Orient had repudiated the insurance policy after realising that the insured had breached the terms and conditions of the policy. On March 2011, Kamacheh obtained a judgement in default against both the pillion rider and the son of the insured. Damages were assessed by the Sessions Court in the sum of RM219,112. As no payment was made either by the pillion rider or the son of the insured, Kamacheh sent the sealed copy of the judgement to Pacific Orient. However, Pacific Orient did not make any payment to Kamacheh, and she later commenced a recovery action against Pacific Orient for the full judgement sum of RM219,112.
Liability of the insurer for the injuries caused to a third party
Both the Sessions Court and the High Court held that Pacific Orient was liable to pay the sum of RM219,112 to Kamacheh because there is a statutory obligation under section 96 of the RTA requiring an insurer to pay (Kamacheh) the judgement sum. Section 91(1)(b) of the RTA stipulates that a policy of insurance must be a policy which insures such person or class of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of, or bodily injury to, any person caused by or arising out of the use of the motor vehicle.
The judges agreed that the word “arising out of the use of the motor vehicle” connotes not only the actual driving of the vehicle but also the use of the vehicle on the road. Furthermore, as the liability of Pacific Orient is statutory in nature, there was nothing in the RTA that could exempt Pacific Orient from its liability to pay Kamacheh even though, at the time of the incident, the motorcycle was used for an illegal purpose. The Court of Appeal held that Section 91(1)(b) also included liability for damages arising from acts of a criminal nature. In any event, the court held that Kamacheh’s injuries were indeed caused by or arose out of the insured’s use of his motorcycle and that there is nothing in the RTA that restricts the right of a third party to make a claim arising out of the use of the vehicle in the commission of a criminal act.
Conclusion
Whilst this case appears to allow an insured to avoid the personal liability of paying an aggrieved third party by “transferring” his liability to the insurer, the courts will not allow an insured to profit from his wrongful actions. In the event a third party obtains judgment against an insured, the insured, if he is at fault, would not be entitled to claim against his insurer. The objective of the law is to protect the third party who has suffered loss and not the insured, if he is at fault, whose asset may be insufficient to satisfy the losses suffered by the third party. Therefore, the insured’s (in)ability to pay damages to the third party is mitigated or “insured” by the insurer. It is unsurprising that the courts decided in favour of the third party given the reasons above. The position taken by the courts mirror the law in other countries such as Singapore, the United Kingdom and India. Whether or not this decision will now cause Malaysian insurers to raise insurance premiums remains to be seen, and if premiums are increased, whether this would run afoul of the Price Control and Anti-Profiteering Act 2011.
Contributed by Nur Ayuni binti Ab Rahim of Christopher & Lee Ong (www.christopherleeong.com).